Raytheon enters $1.7bn JV with Vista Equity Partners

The JV will create a new defense-grade cybersecurity company

US defense company Raytheon has entered into a $1.7 billion joint venture with Vista Equity Partners.

Under the terms of the deal, Vista portfolio company Websense will combine and create a new entity with Raytheon Cyber Products, a division of Raytheon’s Intelligence, Information and Services (IIS) segment.

The new company will combine features of both Raytheon and Websense’s cybersecurity offerings to bring a defense-grade cybersecurity product to market.

Raytheon's net cash contribution is approximately $1.57 billion for an 80.3 percent ownership of the joint venture. As part of the transaction, Raytheon will contribute $1.9 billion (net of cash acquired) to acquire Websense, of which $600 million will be in the form of an intercompany loan to the joint venture. Raytheon will also contribute the assets of Raytheon Cyber Products and related intellectual property, which is valued at $400 million.

Vista will invest $335 million for a 19.7 percent stake in the company.

With each of these investments combined, the enterprise value of the venture is approximately $2.3 billion.

“The market for advanced cyber solutions that protect and defend global industry and infrastructure is rapidly growing due to the sophisticated threats posed by well-funded, nation-state adversaries and criminal networks,” said Thomas A. Kennedy, Raytheon Company chairman and CEO.

The CEO of the new company will be John R. McCormack, CEO of Websense. Representatives from both Raytheon and Vista Equity Partners will join the board.

The transaction is expected to close in the second quarter of 2015.